XMM-Newton observed SAX J2103.5+4545 on January 6, 2003, while RXTE was monitoring the source. Using RXTE-PCA dataset between December 3, 2002 and January 29, 2003, the spin period and average spin-up rate during the XMM-Newton observations were found to be 354.7940+/-0.0008 s and (7.4 +/- 0.9) x 10(exp -13) Hz/s respectively. In the power spectrum of the 0.9-11 keV EPIC-PN lightcurve, we found quasi periodic oscillations around 0.044 Hz (22.7 s) with an rms fractional amplitude approx. 6.6 %. We interpreted this QPO feature as the Keplerian motion of inhomogeneities through the inner disk. In the X-ray spectrum, in addition to the power law component with high energy cutoff and approx. 6.4 keV fluorescent iron emission line, we discovered a soft component consistent with a blackbody emission with kT approx. 1.9 keV. The pulse phase spectroscopy of the source revealed that the blackbody flux peaked at the peak of the pulse with an emission radius approx. 0.3 km, suggesting the polar cap on the neutron star approx. 6.42 keV was shown to peak at the off-pulse phase, supporting the idea that this feature arises from fluorescent emission of the circumstellar material around the neutron star rather than the hot region in the vicinity of the neutron star polar cap.